Tanzania background information

Tanzania is a developing nation in Eastern Africa, bordering Kenya and Uganda to the North, Rwanda, Burundi and the DRC to the West, and Zambia, Malawi and Mozambique to the South. To the East is the Indian ocean, and the islands of Mafia, Pemba, and Zanzibar.

The terrain ranges from coastal plains in the East to the central plateau, to highlands in the North and South of the country. Tanzania's territory includes Mt. Kilimanjaro, the highest peak on the continent at 5 985m. Major bodies of fresh water are Lake Victoria in the North and Lake Tanganyika in the South-West.

Mineral deposits in Tanzania include uranium, tin, phosphates, iron ore, coal, diamonds, gemstones, gold, natural gas and nickel. Best known for gold and
diamond production, Tanzania is also home to the only source of the rare gemstone Tanzanite.

Gold deposits have generally been located in the greenstone belts to the east and south of Lake Victoria, and in rock formations in the southern and
southwestern part of the country. Base metals have been found in a belt running from Kagera through Kigoma to Mbeya, Ruvuma and Mtwara regions.

Gemstone deposits are found in eastern and western belts, running from the border with Kenya in the north to Mozambique in the south and Mbeya and Rukwa
regions. In addition to 300 known kimberlite pipes, the government of Tanzania website cites recent surveys identifying some 600 magnetic anomalies with
"similar geophysical characteristics to known kimberlite pipes." The oldest commercial diamond operation--the Williamson mine in the north of the
country--dates back to 1940.

A British mandate following World War I, the country, originally called Tanganyika, gained its independence in a relatively peaceful fashion
in 1961. The island of Zanzibar became independent from Britain in late 1963. Following the bloody overthrow of the constitutional monarchy and a very
short-lived Republic of Zanzibar and Pemba, Zanzibar merged with Tanganyika in April 1964, to form the United Republic of Tanganyika and Zanzibar. Soon
after, the country was renamed Tanzania, an amalgamation of the two names.

Legal climate: a historical background

To appreciate the challenges stemming from the regulatory and legislative climate in Tanzania, it is important to consider the changes mining
legislation in the country have undergone over the years.

British protectorate

There is no evidence of organized, large-scale mining taking place in Tanzania during the period preceding Britain's assumption of control of the
country in 1918. From the outset, respecting Tanzania's (then Tanganyika) status as a Protectorate, the British government recognized customary land
ownership by the native population. This changed when, in 1920, gold deposits were discovered in the country. An ordinance was issued at that time,
making it clear that all mineral rights were vested with the governor. The 1920 ordinance was further amended in 1929, to prevent the influx of poor
white prospectors from neighbouring countries. Under the amended ordinance, all prospecting and mining activity had to be done in partnership with the
government. The 1929 ordinance remained in force until 1969, when another amendment was introduced, giving the Minister of Mines full control over
prospecting and mining licenses.

1979 Mining Act

The next revision of mining legislation came in 1979. At this time, all ownership of mineral resources was vested in the State of Tanzania, with the
President as its representative. In an attempt to prevent conflicts of interest, this version of the Act also expressly prohibited Ministry of Mines
officials from holding shares in mining companies or licenses.

A lack of clear division of jurisdictions over the sector has resulted in ambiguity in mining and related activities. According to its website, the
Tanzania Investment Centre (TIC), which staffs seven permanently stationed senior officials, including one from the Lands Department, is supposed to be
the point of first contact for potential mining investors; however, while the Centre has served as the initial point of contact for some investors,
others have worked both through the TIC and via contact with the Ministry of Lands, and others still have worked with the Ministry and have had no
contact with the TIC.

1997 Mineral Policy

The most recent revision of mining legislation took place in 1997, with the October publication of the Minerals Policy. The Policy, published by the
Ministry of Energy and Minerals, has highlighted a most laudable intent: to have small-scale mining operators continuing work alongside large-scale
ones. In the Policy, Tanzanian nationals are given exclusive rights to key roles in small-scale mining, such as mine claim holder, broker, and dealer.
Large-scale mining is open to international companies, who are able to bring the needed capital and experience. The policy also proposes to
decentralize the monitoring of the mineral sector.

The main problems with the policy seem to be an inability on the government's part to implement the proposed changes, and a general ambiguity in
the laws governing land use and mineral rights. Further, there is a concern that too much power has been placed in the hands of the Commissioner of
Mining, who has the final decision power over claim-related disputes. While the option of bringing a dispute before the courts is available to all
involved parties, the costs associated with bringing a legal case make this a non-viable course of action for most of the country's smallholders
and pastoralists.

Refugees

Tanzania is host to over 500 000 refugees; more than any other African country, according to the CIA World Factbook. These are primarily from Burundi (over 352 000 as of 2007) and The Democratic Republic of Congo (128 000 as of 2007).

The Burundian refugees, mostly ethnic Hutus, have been fleeing to neighbouring countries--mostly Tanzania--in waves since 1965, due to racial tensions in the country. 1972 saw the largest number (nearly 300 000) fleeing Burundi, following the mass slaughter of Hutus. While some 40 000 returned in anticipation of the 1993 elections, most did not. Following the 1993 post-election crisis, an additional 400 000 people fled Burundi.

Though most refugees have now returned to Burundi, a very significant number are still living in camps. Tanzanian authorities have been working with their Burundian counterparts on the repatriation process for the refugees; however, an Amnesty International report published in June 2009 raised concerns that refugees were being pressured and threatened as a strategy to force them to return to Burundi.

Health

Tanzania's poverty and lack of crucial health care and other infrastructure show themselves in a number of ways. Tanzania has been struggling with malaria outbreaks and an HIV/AIDS epidemic. USAID reports the HIV infection rate to be 6% of the 41.5 million people living in the country. As a result of these and other factors, life expectancy in the country is 51 years (as compared to 80.3 years in Canada), and continuing to decrease.

Infant mortality is very high as well. According to the 2009 report released by Amnesty International, 123 male children out of 1000 die before the age of five, as do 110 out of every 1000 female children (the mortality rates in Canada are 6/1000 for either gender).

The lack of basic health care provision is a serious obstacle in the country's continued development, but a number of initiatives have shown significant positive results. USAID reports that malaria-related deaths on the mainland have decreased by 50%, from 120 000/year in 2005 to 60 000 in 2008. Infant and child mortality have also seen significant improvements since 2003, down by 31% and 24%, respectively.

Economy

Tanzania is one of the world's poorest countries. The 2008 GDP was reported by the US Dept. of State to be equivalent to US $18.3 billion (and reported at $20.67 billion by the CIA World Factbook), but the government struggles with an overwhelming debt load: US $5.311 billion in external debt and a further US $1.67 billion in domestic debt. According to the Tanzanian government's 2009 budget announcement, the debt (reported as a slightly lower US$6.329 billion) amounted to 32.6% of total GDP, up from 31.8% in December 2007.

The country receives a significant amount of aid from foreign donors. According to an April Reuters article, Tanzania is expected to receive US $690 million in aid over the course of the 2009/10 fiscal year. This Day, a nation-wide Tanzanian newspaper, reported on November 27th 2009 that so-called "general budget donations" -- donations from foreign sources to be used as additional cash in government expenditures and programs -- are responsible for US $831 million, and account for 11.4% of the country's annual budget.

Tanzania has been the recipient of payment relief under the Heavily Indebted Poor Countries (HIPC) as well as the Multilateral Debt Reduction Initiative (MDRI) programs due to the level of the country's indebtedness. This reduced the country's debt payments from US $90.3 million paid in 2006 to US $42 million paid in 2007.

In the 2009-2010 budget summary, the government has highlighted reducing dependence on foreign donors as an area of importance. This theme was also present in the previous fiscal year's budget but, as the new budget acknowledges, "due to the economic crisis, the revenue target was not achieved." The financial crisis continues to make an impact, with 45% of the new fiscal year's annual revenue predicted to come from a combination of grants and loans.

The extreme poverty of the majority of the population has served to further increase tensions between the local communities and international and large-scale mining operators, who are routinely accused of plundering the country's mineral wealth. This sentiment was a major theme in the 2005 general elections, when current president Kikwete assumed his post. The outcry over the 1998 Mining Act ,"whose unfairness is glaringly manifested," according to the editorial column in the April 12th, 2009 issue of The Guardian newspaper, did not abate with the passing of the elections. The president addressed public pressure by promising to review both the Mining Act and the existing contracts. In 2007 he created the Presidential Mining Review Committee, headed by Justice Mark Bomani, which concluded its work in April 2008.

The financial crisis and the elections slated for November of 2010 have put additional pressure on the Tanzanian government to promote growth in the mining sector, particularly its revenues. With this goal in mind, the government has renegotiated a number of royalty contracts with the major foreign operators and is in the process of renegotiating others. In June 2009 the government also announced that it would be reinstituting duties and levies on fuel imported for use by the mining industry, and limiting its VAT Special Relief program to prospecting and exploration activities only. It is also in the process of revising the Mining Act, which has many stakeholders optimistic about updates that would benefit both sides in a more equitable way.